Keystone Today

The National Federation of Independent Business (NFIB), a prominent advocacy group for small businesses in Pennsylvania, has issued a report emphasizing the potential impacts of a possible tax increase on small businesses. The report explains the advantages of making the 20% Small Business Tax Deduction permanent, a decision that would affect the 1.1 million small businesses statewide.

According to the document, if the 20% Small Business Deduction is not upheld by Congress this year, small businesses could see a substantial tax increase. This spike poses a risk not only to Pennsylvania's economy but could extend its effects to the broader U.S. economy, potentially resulting in an economic slowdown and financial challenges for local enterprises.

The report draws a clear comparison between the tax obligations of small businesses and larger corporations if the deduction lapses. It notes that the C-Corp tax rate would remain at 28.99%, whereas the small business rate could rise to 42.67%. In contrast, keeping the deduction would balance the small business tax rates with those of larger companies.

Additionally, maintaining the deduction could lead to significant economic growth, projecting Pennsylvania to gain 51,000 new jobs each year over the next decade. The state's GDP could see an annual increase of $2.79 billion for the first ten years and $5.75 billion annually after 2035.

Greg Moreland, the NFIB Pennsylvania State Director, stated, “Pennsylvania’s small businesses create jobs and strengthen our local economy.” He warned that letting the deduction expire would entail a severe tax hike, potentially stifling business growth, hindering hiring efforts, and jeopardizing many small businesses. "With the deduction set to expire this year, lawmakers must act quickly to protect small businesses and the communities they support," Moreland added.

The 20% Small Business Tax Deduction, initiated by the Tax Cuts and Jobs Act of 2017, has been instrumental for small business owners, enabling them to expand operations, hire more employees, and increase wages. Absent congressional action to make it permanent, nine out of ten small businesses could confront a larger tax burden, threatening jobs and broader economic stability across the country.

More information regarding NFIB's advocacy actions and the detailed report for Pennsylvania can be found on their website.